Butler & Cook, Inc. v. Centerpoint Energy Gas Transmission Company et al
Filing
16
MEMORANDUM OPINION AND ORDER denying 7 Plaintiff's Motion to Remand and dismissing separate defendant Billy Carter. All parties to bear their own costs and fees. Signed by Honorable Robert T. Dawson on September 18, 2012. (sh) Modified to add text on 9/18/2012 (sh).
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
BUTLER & COOK, INC.
PLAINTIFF
v.
Case No. 2:12-2107
CENTERPOINT ENERGY GAS
TRANSMISSION COMPANY and
BILLY CARTER
DEFENDANTS
MEMORANDUM OPINION AND ORDER
Before
the
Court
are
Plaintiff
Butler
&
Cook,
Inc.’s
(“B&C”) Motion to Remand (Doc. 7) and Brief in Support (Doc. 8),
Defendant
CenterPoint
Energy
Gas
Transmission
Company’s
(“CenterPoint”) Response (Doc. 13), and Plaintiff’s Reply (Doc.
14) and Brief in Support (Doc. 15). For reasons set forth below,
Plaintiff’s Motion to Remand (Doc. 7) is DENIED.
I.
Background
B&C filed an Amended Complaint in Sebastian County Circuit
Court
on
(“Carter”)
May
17,
2012,
alleging
against
breach
of
CenterPoint
contract,
and
Billy
promissory
Carter
estoppel,
unjust enrichment, fraud and constructive fraud, and violation
of
Arkansas’
Deceptive
Trade
Practices
Act.
(Doc.
2).
Defendant CenterPoint removed the matter to this Court, alleging
that co-defendant Carter was fraudulently joined for the purpose
of
defeating
corporation,
diversity.
Carter
is
(Doc.
an
1).
Arkansas
Page 1 of 14
B&C
resident
is
and
an
Arkansas
employee
of
CenterPoint and CenterPoint is a Delaware corporation with its
principal place of business in Houston, Texas, doing business in
Arkansas.
(Doc. 2).
On May 21, 2012, B&C filed a Motion to Remand the case to
State
Court,
contending
Carter
was
properly
necessary party to avoid piecemeal litigation.
joined
as
(Doc. 7).
a
B&C
contends this Court lacks diversity jurisdiction because B&C and
Carter
are
arguing
B&C
both
has
Arkansas
not
citizens.
shown
more
CenterPoint
than
a
mere
responded,
theoretical
possibility of recovery against Carter and thus the joinder was
improper.
(Doc. 13).
For purposes of this Motion, the following facts, taken
from the Complaint, are assumed true and viewed in the light
most favorable to B&C.
B&C operates a machine shop serving
local manufacturers and oil-and-gas firms in performing repairs
and maintenance on industrial machinery and hydraulic equipment,
tooling steel, and fabricating parts for industrial machinery.
For two-and-a-half years CenterPoint hired B&C to repair and
maintain hydraulic equipment used in its Fort Smith, Arkansas,
operations.
Such repairs were performed pursuant to a Master
Service Agreement (“MSA”), executed in September, 2009.
(Doc.
1, Ex. 4). The Amended Complaint does not concern work done
pursuant
to
CenterPoint’s
the
MSA
or
personal
repairs
and
maintenance
property
but
only
Page 2 of 14
the
performed
use
of
on
B&C’s
workforce assets in connection with real property fixtures owned
by CenterPoint.
Nonetheless, portions of the MSA are applicable
to this matter.
Section II C provides:
The execution of this Agreement by Company and
Contractor does not obligate Company to offer any work
to Contractor nor does it obligate Contractor to
accept any work offered or requested by Company.
Rather, the parties shall only be bound to the terms
of this Agreement upon the issuance and acceptance of
a Work Order properly executed by representatives of
both parties. Each properly executed Work Order shall
be deemed a separate contract between the parties.
(Doc. 1, Ex. 4, P. 2).
Section IV D provides:
Company shall designate in writing to Contractor,
prior
to
the
commencement
of
the
Work,
a
representative who shall be fully acquainted with the
Work and who has authority on behalf of Company to
approve changes in the scope of the Work, approve any
daily
reports
submitted
by
Contractor,
render
decisions
promptly,
and
furnish
information
expeditiously.
(Doc. 1, Ex. 4, P. 8).
Arkansas
requires
parties
to
hold
a
license
when
they
undertake to construct or repair improvements to real property
such as a pipeline. (Doc. 2, P. 6).
No such license is required
to do mechanical and fabricating work on personal property.
The
Amended Complaint states that as CenterPoint’s manager 1, Carter
promised
B&C
that
if
it
would
spend
the
money
required
to
qualify for a license, CenterPoint would add B&C as an approved
1
CenterPoint argues that Carter was not a manager;
Technician Line Stop and Hot Tap.” (Doc. 13, P. 6).
Page 3 of 14
his
title
was
“Lead
vendor
for
working
on
its
pipelines.
(Doc.
2,
P.
5).
In
September, 2010, B&C released two of its employees to work for
CenterPoint through a temporary agency, and began the process of
obtaining
temporary
a
contractor’s
service
license.
approximately
CenterPoint
$30.00
per
hour
paid
per
the
worker,
which is less than the $65.00 hourly rate B&C and other outside
machine
shops
would
charge
through a temporary agency.
every
requirement
for
the
same
work
without
going
By January 2011, B&C had fulfilled
specified
by
Carter,
but
neither
he
nor
CenterPoint assigned work directly to B&C, even though they were
aware B&C had obtained the license Carter demanded. (Doc. 2, P.
6).
Instead, CenterPoint continued to assign work through the
temporary agency, at the reduced rate.
insisted
that
in
order
for
B&C’s
Carter allegedly also
trained
welders
to
work
directly for CenterPoint, they must be certified. After B&C was
licensed
and
its
continued
to
temporary
agency.
employees
utilize
The
B&C
had
been
employees
Amended
certified,
by
Complaint
going
alleges
CenterPoint
through
the
Carter
and
CenterPoint never intended for B&C to benefit from CenterPoint’s
exploitation of B&C’s assets, and Carter and CenterPoint knew by
December 2010, or shortly thereafter, that B&C would not be paid
shop rates for those services. According to B&C, Carter never
communicated CenterPoint’s decision not to pay B&C directly for
the use of its workers. (Doc. 2, P. 7).
Page 4 of 14
The
Amended
Complaint
alleges
B&C’s
Chief
Operating
Officer, Danny Wilson, made repeated efforts to contact Carter
in order to collect money allegedly owed to B&C for the use of
its workers. (Doc. 2, P. 7).
B&C asserts Carter issued false
assurances that work orders and payment would be forthcoming,
and continued using B&C workers through the temporary agency.
In
August
2011,
Carter
referred
Wilson
to
Garry
Director of Design Engineering at CenterPoint.
Bassett of his dealings with Carter.
Bassett,
Wilson advised
B&C alleges Bassett told
it he was aware of the dealings between B&C and Carter and would
see to it that B&C was paid.
statement
was
fraudulent,
The Amended Complaint argues this
and
Bassett
and
CenterPoint
were
determined to “string the Plaintiff along” and accept valuable
benefits they knew B&C expected payment for, but for which they
never intended to authorize payment to B&C.
B&C claims it is
the victim of a “scheme” instrumented by Carter and CenterPoint.
The Amended Complaint alleges Carter managed CenterPoint’s
facility
authority
in
to
Fort
Smith
direct
and
had
operations
the
actual
conducted
by
and/or
the
apparent
Fort
Smith
office on a day-to-day basis and the apparent authority to bind
CenterPoint
to
pay
the
reasonable
beneficially provided to CenterPoint.
value
of
any
services
(Doc. 2, P. 3).
The
Amended Complaint further states that if Carter knew that he did
not have actual authority to bind CenterPoint to contracts, then
Page 5 of 14
the fact that he promised compensation and future benefits to
induce
B&C
to
part
with
actually fraudulent.
liability
for
valuable
workforce
assets
would
be
In that case, according to B&C, Carter’s
that
conduct
would
be
personal.
The
Amended
Complaint asserts Carter was an actual employee and agent of
CenterPoint,
and
employment.
B&C contends because Carter induced B&C to part
with
acted
consideration
in
that
the
course
afforded
CenterPoint,
any
statements
CenterPoint,
even
if
by
and
an
actual
Carter
fraudulent.
As
a
scope
are
of
his
benefit
to
attributable
result,
B&C
to
alleges,
CenterPoint is liable for the damages caused by those statements
based
on
the
doctrine
of
respondeat
superior,
and
also
chargeable with notice of any facts known by Carter during the
course and scope of his employment.
B&C
seeks
damages
in
the
$100,000.00
in
CenterPoint.
amount
damages
of
from
$67,275.00
both
Carter
and
(Doc. 2, P. 15).
II.
punitive
(Doc. 2, P. 7).
and
Standard of Review
The Eighth Circuit has defined fraudulent joinder as “the
filing of a frivolous or otherwise illegitimate claim against a
non-diverse
defendant
solely
to
prevent
removal.”
Filla
v.
Norfolk Southern Ry. Co., 336 F.3d 806, 809 (8th Cir. 2003).
Fraudulent
joinder
exists
when
a
party
has
deprive the federal court of jurisdiction.
Page 6 of 14
been
joined
to
Anderson v. Home
Ins.
Co.,
724
F.2d
82,
84
(8th
Cir.
1983).
The
burden
of
proving fraudulent joinder rests on the removing defendant, and
all
doubts
should
be
resolved
in
favor
of
remand.
In
re
Business Men’s Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir.
1993).
In assessing a fraudulent joinder claim, the Court “must
simply
determine
whether
there
is
a
reasonable
basis
for
predicting that the state’s law might impose liability against
the
defendant.”
Filla
at
811.
This
means
the
Court
must
determine whether Arkansas law might impose liability against
Carter
for
either
breach
of
contract,
promissory
estoppel,
unjust enrichment, fraud or violation of the Arkansas Deceptive
Trade Practices Act.
III. Discussion
B&C argues that if the Court were to find that CenterPoint
is not bound by the contract, it should find that Carter is
bound.
In Lasater v. Crutchfield, 92 Ark. 535 (Ark. 1909), the
Arkansas Supreme Court held that an employee who acted beyond
the
scope
of
contract.
his
employment
became
personally
liable
on
the
However, B&C has not alleged facts which show the
representations of Carter rose to the level of a contractual
promise,
or
willingness
obtaining
anything
to
proper
other
contract
than
a
mere
contingent
certification.
In
Page 7 of 14
indication
upon
fact,
B&C’s
of
future
employees
nowhere
in
its
complaint
does
B&C
mention
breach of contract.
Garry
Basset,
“confirmed
a
his
recompense.”
Carter’s
potential
liability
for
On the contrary, B&C alleges that it was
CenterPoint
knowledge
of
executive
the
(Doc. 2, P. 11).
in
Louisiana,
arrangement
and
who
promised
Further, the Complaint alleges
that B&C “entered a contract with CenterPoint obliging Butler &
Cook
to
obtain
a
13)(emphasis added).
contractor’s
license....”
(Doc.
2,
P.
According to the Complaint, Carter simply
“approached Butler & Cook with a proposal to have Butler & Cook
send some of its employees out to operate “hot tap” equipment on
pipelines....”
(Doc. 2, P. 9).
Based on B&C’s own allegations
there is no basis for arguing that Carter is personally liable
on
a
contract
he
may
or
may
not
have
entered
into
on
CenterPoint’s behalf.
To state a claim for fraud, a plaintiff must plead the
existence
of
five
elements:
(1)
a
false
representation
of
material fact; (2) knowledge that the representation is false or
that
there
is
representation;
insufficient
evidence
(3)
to
intent
induce
upon
which
action
or
to
make
the
inaction
in
reliance upon the representation; (4) justifiable reliance upon
the representation; and (5) damage suffered as a result of the
reliance.
DePriest
v.
AstraZeneca
Pharmaceuticals,
L.P.
2009 Ark. 547 (2009); McAdams v. Ellington, 333 Ark. 362 (1998).
B&C alleges in its Complaint that it was motivated to incur the
Page 8 of 14
losses
it
did
“because
Carter
had
promised
benefits
in
the
future.”
(Doc. 2, P. 10).
The Arkansas Supreme Court has often
affirmed
that
of
projections
future
events
or
a
promise
future conduct may not form the basis of a fraud claim.
Tee,
Inc.
v.
Venture
Golf
of
Golden
Schools,
Inc.,
333 Ark. 253 (1998); South County, Inc. v. First Western Loan
Co., 315 Ark. 722 (1994).
predicting
that
B&C
can
There is no reasonable basis for
establish
a
claim
against
Carter
personally for fraud.
The
law
on
promissory
estoppel
is
set
out
in
the
Restatement (Second) of Contracts:
A promise which the promisor should reasonably expect
to induce action or forbearance on the part of the
promisee or a third person and which does induce such
action or forbearance is binding if injustice can be
avoided only by enforcement of the promise. The remedy
granted for breach may be limited as justice requires.
See K.C. Props. v. Lowell, 373 Ark. 14 (2008); Rigsby v. Rigsby,
356 Ark. 311 (2004).
Liability for fraud and promissory estoppel both depend on
the reasonableness of the plaintiff’s reliance on defendant’s
statements.
Given
the
language
in
the
MSA
that
only
representatives who are designated in writing have the authority
to bind CenterPoint, that CenterPoint is not obligated to offer
any work to B&C and that the parties are only bound upon the
issuance and acceptance of a properly executed work order, it
Page 9 of 14
was patently unreasonable for either Carter or B&C to believe
that B&C could rely on statements made by Carter.
there
is
establish
no
a
reasonable
claim
basis
against
for
Carter
predicting
Accordingly,
that
personally
for
B&C
can
Promissory
Estoppel.
To
find
unjust
enrichment,
a
party
must
have
received
something of value, to which he or she is not entitled and which
he or she must restore. See El Paso Prod. Co. v. Blanchard, 371
Ark. 634 (2007).
In its Amended Complaint, Plaintiff alleges
that Carter and CenterPoint are jointly and severally liable for
$67,275.00, or alternatively $66,500.00 payable by CenterPoint
only.
(Doc. 2, P. 14).
amount
that
CenterPoint
This figure supposedly represents the
would
have
had
to
pay
B&C
for
work
performed had it hired B&C directly as opposed to going through
a temporary service and paying a reduced hourly rate, plus the
fees
and
costs
associated
with
obtaining
certification and hiring additional workers.
licensure
and
This theory of
recovery fails for two reasons.
First, Carter did not receive any benefit from B&C as a
result of his statements or promises.
In its damage claim, B&C
states that CenterPoint was unjustly enriched in the amount of
no less than $52,500.
(Doc. 2, P. 12)(Emphasis added).
Nowhere
in the Amended Complaint does B&C allege that Carter received
Page 10 of 14
anything of value which he should be required to restore to
avoid injustice.
Second, the facts alleged in the Complaint do not indicate
that CenterPoint was unjustly enriched by Carter’s actions.
The
fact
its
that
B&C
believed
that
CenterPoint
should
hire
employees directly at the higher hourly rate matters little when
what actually happened was that CenterPoint continued to use the
same employees through the temporary agency at a reduced rate.
In general, the focus of unjust enrichment is based on what the
enriched person received rather than what the opposing party
lost.
Grisanti v. Zanone, 2012 Ark. App. 545 (Ark. App. 2009);
Feagin
v.
Jackson,
2012
WL
1522297
at
*8
(Ark.
App.
2012).
Although B&C alleges that CenterPoint was unjustly enriched in
the
amount
for
which
it
claims
its
services
are
worth,
the
actual value of the services performed is what the temporary
agency charged for the work and CenterPoint paid for it.
There
is no reasonable basis for predicting that B&C can establish
liability against Carter personally under the theory of unjust
enrichment.
CenterPoint argues that as a consumer protection statute,
the Arkansas Deceptive Trade Practices Act does not apply to
B&C.
(Doc. 1, P. 8).
that
the
Arkansas
However, this Court has previously held
Deceptive
Trade
Practices
Act
does
not
conclude that business entities or non-consumers cannot utilize
Page 11 of 14
its provisions as a basis for recovery.
Valor Healthcare, Inc.
v.
LEXIS
Pinkerton,
et.
al,
2008
U.S.
Dist.
105988
(Western
District Arkansas, December 23, 2008); see Ark. Code Ann. § 488-101.
any
Plaintiff does not allege, or set forth any facts with
specificity,
representation
benefits,
as
that
to
Carter
the
alterations,
knowingly
made
“characteristics,
source,
any
ingredients,
sponsorship,
false
uses,
approval,
or
certification of goods or services or as to whether goods are
original or new or of a particular standard, quality, grade,
style or model.”
See Ark. Code Ann. § 4-88-107(a)(1).
All of
the alleged statements attributed to Carter are with respect to
inducing
B&C
to
pursue
certification
and
licensure
with
the
promise to hire their employees directly instead of indirectly
through a temporary agency.
unfair
showing
business
that
deceptive
practice,
Carter
act
or
In order to state a claim for an
B&C
engaged
practice
in
in
Ark.Code Ann. § 4–88–107(a)(10).
is
an
required
to
allege
unconscionable,
business,
commerce
facts
false,
or
or
trade.
The word “unconscionable” has
been defined to mean an act that affronts the sense of justice,
decency, and reasonableness. Baptist Health v. Murphy, 365 Ark.
115 (2006).
Here, B&C alleges that Carter falsely represented
that if B&C would obtain certain certification and licensure,
CenterPoint would hire B&C’s employees directly at a higher rate
than they were paying to the temporary agency.
Page 12 of 14
In its prayer
for relief, B&C seeks damages for the earnings B&C would have
made if the alleged contract had been performed and the benefits
that B&C paid to secure the continued services of workers whom
it made available for CenterPoint’s use.
Although labeled as
“deceptive”
alleged
and
“unconscionable”,
Carter’s
wrongs
are
not of the type and character as to bring them within the scope
of
the
Arkansas
performance
of
Deceptive
a
duty
Trade
under
a
Practices
contract
is
Act.
When
the
contemplated,
the
nonperformance of that duty is most typically known as a breach.
Taylor v. George, 92 Ark. App. 264 (2005).
In its prayer for
relief, B&C seeks damages to recover the amount it expended in
reliance on Carter’s statements and the amount it would have
received
had
CenterPoint
hired
its
employees
directly.
The
claims stated by B&C constitute, if anything, an ordinary breach
of contract claim that does not rise to the level of violating
the Arkansas Deceptive Trade Practices Act.
See CEI Engineering
Associates, Inc. v. Elder Construction Company, 2009 Ark. App.
259
(Ark.
arbitration
App.
of
2009)(Trial
plaintiff’s
court
Arkansas
erred
by
Deceptive
not
compelling
Trade
Practices
Act claim because the true character of the claim was for breach
of contract.)
There is no reasonable basis for predicting that Arkansas
law might impose liability against in-state defendant Carter for
either
breach
of
contract,
unjust
Page 13 of 14
enrichment,
promissory
estoppel, fraud or violation of the Arkansas Deceptive Trade
Practices
Act.
Accordingly,
the
Court
finds
that
Defendant
Carter was fraudulently joined in these proceedings in order to
defeat
federal
jurisdiction.
Billy
Carter
is
therefore
dismissed from this action without prejudice.
IV.
Conclusion
For
the
reasons
set
Remand (Doc. 7) is DENIED.
out
herein,
Plaintiff’s
Motion
to
Defendant Billy Carter is dismissed
without prejudice and the Court’s jurisdiction over this matter
is proper pursuant to 28 U.S.C. §1332 (a)(1).
All parties are
to bear their own costs and fees.
IT IS SO ORDERED this 18th day of September, 2012.
/s/ Robert T. Dawson
Honorable Robert T. Dawson
United States District Judge
Page 14 of 14
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